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Cuba's New Mantra: Viva Private Business

Venezuelan President Hugo Chavez (right) speaks with his Cuban counterpart, Raul Castro, during a military parade earlier this year in Caracas, Venezuela. Chavez has provided an economic lifeline to Cuba. Now, that lifeline is under threat as the Venezuelan leader fights cancer and faces re-election.AFP/Getty Images

Socialism has been Cuba's official economic policy for more than a half-century, and some 85 percent of the Cuban workforce is employed by the state.

But that is changing fast. Communist authorities say that nearly half of Cuba's economic activity will shift to the private or "non-state" sector in the next four or five years.

Those plans signal a new urgency to Cuban President Raul Castro's economic reforms, and one reason is that Venezuelan President Hugo Chavez, the island's biggest benefactor, is battling cancer and facing re-election in October.

The new approach was evident in this year's May Day parade in Havana, which was a little different from the Soviet-style processions of the past.

Between the drumming and the dancing girls writhing around on floats in tightfitting tops, it was hard to hear Cuban officials exhorting workers to greater efficiency and more discipline.

The state workers, duty-bound to attend the parade, were making the most of it, even if there wasn't a lot to celebrate. Average salaries in Cuba remain stuck at about $20 a month, with officials saying wages can't rise until productivity increases.

Still, there was a growing contingent of new Cuban workers on the march this year: self-employed entrepreneurs and private business owners like Lazaro Enciso. Carrying a banner with some of his 20 employees, he said he'd come to show support for Raul Castro's liberalization moves.

"This is a new way to create jobs for our country," said Enciso, who runs a snack bar, a clothing shop and another business selling religious items. "As long as you're entrepreneurial, honest and revolutionary, there's no obstacle to success here."

Venezuelan Lifeline In Jeopardy?

As Cubans marched and chanted "Long live the revolution," the island's biggest financial backer, Venezuela's Chavez, was in a Havana hospital for another round of cancer treatments.

Chavez provides the island with two-thirds of its oil on favorable terms, along with more than $5 billion a year in exchange for the Cuban doctors and other professionals working in Venezuela.

Now, with Chavez so ill he has prayed on national television for Jesus to spare his life, Cuban economist Pavel Vidal says it's clear the economic reforms must move faster.

"Cuba's economy is small, and from a political-economic standpoint, it's closed, with a high level of dependency on access to hard currency for growth," says Vidal. "A loss of support from Venezuela would send Cuba into a recession."

Vidal and others say the damage to Cuba's economy wouldn't be as severe as the sudden demise of the Soviet Union a generation ago. The island's relationship with Venezuela is more interdependent, and even if Chavez is no longer in power, it might take time for their two-way trade to untangle.

Despite Changes, More Openness Needed

Still, the possibility is putting pressure on Raul Castro to broaden the reforms. Cuban entrepreneurs still can't contract directly with foreign suppliers or wholesalers, and the government only grants licenses in about 200 types of trades and businesses.

A Havana car wash is one example of Cuban entrepreneurs learning to diversify beyond selling snacks or renting rooms to tourists. But the driveway-sized business only has space to wash and vacuum one vehicle at a time, and it's always full.

Hildelisa Cespedes says her family is waiting to see if local officials will let them rent out a rundown garage around the corner that is owned by the state, the kind of arrangement Cuban authorities say they're still studying.

"If we had a bigger place, we could have more customers and hire more workers," Cespedes says. "We're ready to make the investment."

Cuba's uncertain economic outlook may find a new lifeline even if Venezuelan support dries up. A host of foreign companies are starting to drill for oil in the deep water off Cuba's north coast. If sizable deposits are found, the crude could take years to bring to market, but economists say Cuba's government would get access to fresh lines of credit right away.